securities and exchange commission
☒
2022
☐
______________________
______________________
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FLORIDA | 65-0680967 | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
33445
(Registrant’sRegistrant’s telephone number, including area code)
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, par value $.001 per share | PETS | NASDAQ Global Select Market | ||||||
Yes ☒
Large accelerated filer | Accelerated | ||||||
Non-accelerated filer | Smaller reporting company | ||||||
Emerging growth company | |||||||
December 31, March 31, 2017 2017 (Unaudited) ASSETS Current assets: Cash and cash equivalents Accounts receivable, less allowance for doubtful accounts of $26 and $27, respectively Inventories - finished goods Prepaid expenses and other current assets Total current assets Noncurrent assets: Property and equipment, net Intangible assets Total noncurrent assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Income taxes payable Accrued expenses and other current liabilities Total current liabilities Deferred tax liabilities Total liabilities Commitments and contingencies Shareholders' equity: Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share Common stock, $.001 par value, 40,000 shares authorized; 20,601 and 20,526 shares issued and outstanding, respectively Additional paid-in capital Retained earnings Total shareholders' equity Total liabilities and shareholders' equity, except for per share amounts)amounts) December 31,
2022March 31,
2022 (Unaudited) ASSETS ASSETS $ 80,997 $ 58,730 1,715 1,808 21,907 20,228 974 1,019 105,593 81,785 Current assets: Current assets: Cash and cash equivalents Cash and cash equivalents $ 102,428 $ 111,080 Accounts receivable, less allowance for doubtful accounts of $40 and $39, respectively Accounts receivable, less allowance for doubtful accounts of $40 and $39, respectively 1,944 1,913 Inventories - finished goods Inventories - finished goods 22,402 32,455 Prepaid expenses and other current assets Prepaid expenses and other current assets 5,637 4,866 Prepaid income taxes Prepaid income taxes 1,608 681 Total current assets Total current assets 134,019 150,995 29,138 30,164 860 860 29,998 31,024 Noncurrent assets: Noncurrent assets: Property and equipment, net Property and equipment, net 25,242 24,464 Intangible and other assets Intangible and other assets 5,860 860 Total noncurrent assets Total noncurrent assets 31,102 25,324 $ 135,591 $ 112,809 Total assets Total assets $ 165,121 $ 176,319 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,426 $ 15,221 9,474 659 3,034 2,475 24,934 18,355 Current liabilities: Current liabilities: Accounts payable Accounts payable $ 24,317 $ 27,500 Accrued expenses and other current liabilities Accrued expenses and other current liabilities 6,754 5,697 Total current liabilities Total current liabilities 31,071 33,197 676 1,088 Deferred tax liabilities Deferred tax liabilities 465 936 25,610 19,443 Total liabilities Total liabilities 31,536 34,133 Commitments and contingencies Commitments and contingencies 9 9 21 21 8,664 6,806 101,287 86,530 Shareholders' equity: Shareholders' equity: Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share 9 9 Common stock, $.001 par value, 40,000 shares authorized; 21,077 and 20,979 shares issued and outstanding, respectively Common stock, $.001 par value, 40,000 shares authorized; 21,077 and 20,979 shares issued and outstanding, respectively 21 21 Additional paid-in capital Additional paid-in capital 16,647 11,660 Retained earnings Retained earnings 116,908 130,496 109,981 93,366 Total shareholders' equity Total shareholders' equity 133,585 142,186 $ 135,591 $ 112,809 Total liabilities and shareholders' equity Total liabilities and shareholders' equity $ 165,121 $ 176,319
Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Sales Cost of sales Gross profit Operating expenses: General and administrative Advertising Depreciation Total operating expenses Income from operations Other income: Interest income, net Other, net Total other income Income before provision for income taxes Provision for income taxes Net income Comprehensive income Net income per common share: Basic Diluted Weighted average number of common shares outstanding: Weighted average number of common shares outstanding: Basic Diluted Cash dividends declared per common sharecondensed consolidated statementS of COMPREHENSIVE Three Months Ended
December 31,Nine Months Ended
December 31, 2022 2021 2022 2021 $ 60,110 $ 52,866 $ 206,478 $ 186,144 Sales $ 58,870 $ 60,717 $ 194,451 $ 207,415 38,166 36,223 133,590 128,985 Cost of sales 43,632 42,992 140,819 148,736 21,944 16,643 72,888 57,159 Gross profit 15,238 17,725 53,632 58,679 Operating expenses: 5,818 5,361 18,222 17,206 General and administrative 10,425 7,541 30,529 22,540 4,126 3,170 14,944 13,312 Advertising 4,641 4,327 14,869 15,435 532 457 1,590 855 Depreciation 941 710 2,552 2,051 10,476 8,988 34,756 31,373 Total operating expenses 16,007 12,578 47,950 40,026 11,468 7,655 38,132 25,786 Income (loss) from operations Income (loss) from operations (769) 5,147 5,682 18,653 Other income: 191 36 417 96 Interest income, net 708 84 1,213 243 265 130 755 206 Other, net 259 287 718 741 456 166 1,172 302 Total other income 967 371 1,931 984 11,924 7,821 39,304 26,088 Income before provision for income taxes 198 5,518 7,613 19,637 2,860 2,998 12,204 9,772 Provision for income taxes 217 1,261 2,278 4,603 $ 9,064 $ 4,823 $ 27,100 $ 16,316 Net income (loss) Net income (loss) $ (19) $ 4,257 $ 5,335 $ 15,034 $ 9,064 $ 4,823 $ 27,100 $ 16,316 Net income (loss) per common share: Net income (loss) per common share: $ 0.45 $ 0.24 $ 1.33 $ 0.81 Basic $ (0.00) $ 0.21 $ 0.26 $ 0.75 $ 0.44 $ 0.24 $ 1.33 $ 0.80 Diluted $ (0.00) $ 0.21 $ 0.26 $ 0.74 Weighted average number of common shares outstanding: 20,368 20,253 20,337 20,223 Basic 20,301 20,208 20,257 20,165 20,425 20,408 20,437 20,373 Diluted 20,301 20,329 20,339 20,365 $ 0.20 $ 0.19 $ 0.60 $ 0.57 Cash dividends declared per common share $ 0.30 $ 0.30 $ 0.90 $ 0.90
Nine Months Ended December 31, 2017 2016 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Share based compensation Deferred income taxes Bad debt expense (Increase) decrease in operating assets and increase (decrease) in liabilities: Accounts receivable Inventories - finished goods Prepaid income taxes Prepaid expenses and other current assets Accounts payable Income taxes payable Accrued expenses and other current liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property and equipment Net cash used in investing activities Cash flows from financing activities: Dividends paid Excess tax benefits related to restricted stock Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents, at beginning of period Cash and cash equivalents, at end of period Supplemental disclosure of cash flow information: Cash paid for income taxes Prepaid property and equipment in current assets Dividends payable in accrued expensescondensed consolidated statementS of cash flows(Unaudited) (Unaudited) Nine Months Ended
December 31, 2022 2021 Cash flows from operating activities: $ 27,100 $ 16,316 Net income $ 5,335 $ 15,034 Adjustments to reconcile net income to net cash provided by operating activities: 1,590 855 Depreciation 2,552 2,051 1,858 1,444 Share based compensation 4,987 3,040 (412 ) 1,164 Deferred income taxes (471) (19) 72 368 Bad debt expense 292 104 (Increase) decrease in operating assets and increase (decrease) in operating liabilities: (Increase) decrease in operating assets and increase (decrease) in operating liabilities: 21 (188 ) Accounts receivable (324) 1,216 (1,679 ) 10,661 Inventories - finished goods 10,053 6,780 - (632 ) Prepaid income taxes (927) (911) 45 857 Prepaid expenses and other current assets (771) 1,287 (2,795 ) 387 Accounts payable (3,183) (17,613) 8,815 - 530 410 Accrued expenses and other current liabilities 536 (1,188) 35,145 31,642 Net cash provided by operating activities 18,079 9,781 Cash flows from investing activities: Purchase of minority interest investment in Vetster Purchase of minority interest investment in Vetster (5,000) - (564 ) (9,860 ) Purchases of property and equipment (3,329) (1,266) (564 ) (9,860 ) Net cash used in investing activities (8,329) (1,266) Cash flows from financing activities: (12,314 ) (11,632 ) Dividends paid (18,402) (18,322) - 115 (12,314 ) (11,517 ) Net cash used in financing activities (18,402) (18,322) 22,267 10,265 Net decrease in cash and cash equivalents Net decrease in cash and cash equivalents (8,652) (9,807) 58,730 37,639 Cash and cash equivalents, at beginning of period 111,080 118,718 $ 80,997 $ 47,904 Cash and cash equivalents, at end of period $ 102,428 $ 108,911 Supplemental disclosure of cash flow information: $ 3,801 $ 9,246 Cash paid for income taxes $ 3,870 $ 5,580 $ - $ 863 $ 246 $ 196 Dividends payable in accrued expenses $ 1,079 $ 329
(Unaudited)
(Unaudited)
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers.” This ASU clarifies the accounting for revenue arising from contracts with customers and specifies the disclosures that an entity should include in its financial statements. The standard was effective for annual reporting periods beginning after December 15,2017. During 2016, the FASB issued certain amendments to the standard relating to the principal versus agent guidance, accounting for licenses of intellectual property and identifying performance obligations as well as the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The effective date and transition requirements for these amendments are the same as those of the original ASU. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method).
The Company currently anticipates adopting the standard using the modified retrospective method. The Company has performed a high level analysis of its revenue streams and expects to complete its evaluations in FY 2018, as well as an evaluation of the impact on its business processes, controls and systems. The Company does not expect this standard to affect the Company materially, other than increased disclosures. We plan to complete our assessment of the impact of adoption during fiscal 2018 and finalize the adoption of the new revenue standard in fiscal 2019.
In March 2016, the FASB released Accounting Standards Update on Stock Compensation Improvements to Employee Share-Based Payment Accounting (Topic 718) (ASU 2016-09). ASU 2016-09 requires entities to recognize the income tax effects of share-based awards in the income statement when the awards vest or are settled. The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard was effective for annual and interim periods beginning January 1, 2017. We early adopted this standard as of March 31, 2017. The Company expects that this accounting pronouncement may have a material effect on the Company’s effective tax rate in fiscal 2018, based on the Company’s stock price.
The Company does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’sCompany's consolidated financial position, results of operations, or cash flows.
| Three Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| Revenue (In thousands) | 2022 | % | 2021 | % | $ Variance | % Variance | ||||||||||||||||||||||||||||||||
| Reorder sales | $ | 53,316 | 90.6 | % | $ | 55,259 | 91.0 | % | $ | (1,943) | -3.5 | % | ||||||||||||||||||||||||||
| New order sales | 5,554 | 9.4 | % | 5,458 | 9.0 | % | 96 | 1.8 | % | |||||||||||||||||||||||||||||
| Total net sales | $ | 58,870 | 100.0 | % | $ | 60,717 | 100.0 | % | $ | (1,847) | -3.0 | % | ||||||||||||||||||||||||||
| Internet sales | $ | 51,109 | 86.8 | % | $ | 51,305 | 84.5 | % | $ | (196) | -0.4 | % | ||||||||||||||||||||||||||
| Contact center sales | 7,761 | 13.2 | % | 9,412 | 15.5 | % | (1,651) | -17.5 | % | |||||||||||||||||||||||||||||
| Total net sales | $ | 58,870 | 100.0 | % | $ | 60,717 | 100.0 | % | $ | (1,847) | -3.0 | % | ||||||||||||||||||||||||||
| Nine Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| Revenue (In thousands) | 2022 | % | 2021 | % | $ Variance | % Variance | ||||||||||||||||||||||||||||||||
| Reorder sales | $ | 176,384 | 90.7 | % | $ | 184,607 | 89.0 | % | $ | (8,223) | -4.5 | % | ||||||||||||||||||||||||||
| New order sales | 18,067 | 9.3 | % | 22,808 | 11.0 | % | (4,741) | -20.8 | % | |||||||||||||||||||||||||||||
| Total net sales | $ | 194,451 | 100.0 | % | $ | 207,415 | 100.0 | % | $ | (12,964) | -6.3 | % | ||||||||||||||||||||||||||
| Internet sales | $ | 167,952 | 86.4 | % | $ | 173,713 | 83.8 | % | $ | (5,761) | -3.3 | % | ||||||||||||||||||||||||||
| Contact center sales | 26,499 | 13.6 | % | 33,702 | 16.2 | % | (7,203) | -21.4 | % | |||||||||||||||||||||||||||||
| Total net sales | $ | 194,451 | 100.0 | % | $ | 207,415 | 100.0 | % | $ | (12,964) | -6.3 | % | ||||||||||||||||||||||||||
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||||||||||||||
Net income (numerator): | |||||||||||||||||||||||||||||||||||||||
Net income | $ | 9,064 | $ | 4,823 | $ | 27,100 | $ | 16,316 | |||||||||||||||||||||||||||||||
Shares (denominator): | |||||||||||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding used in basic computation | 20,368 | 20,253 | 20,337 | 20,223 | |||||||||||||||||||||||||||||||||||
Common shares issuable upon vesting of restricted stock | 47 | 145 | 90 | 140 | |||||||||||||||||||||||||||||||||||
Common shares issuable upon conversion of preferred shares | 10 | 10 | 10 | 10 | |||||||||||||||||||||||||||||||||||
Shares used in diluted computation | 20,425 | 20,408 | 20,437 | 20,373 | |||||||||||||||||||||||||||||||||||
Net income per common share: | |||||||||||||||||||||||||||||||||||||||
Basic | $ | 0.45 | $ | 0.24 | $ | 1.33 | $ | 0.81 | |||||||||||||||||||||||||||||||
Diluted | $ | 0.44 | $ | 0.24 | $ | 1.33 | $ | 0.80 | |||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) (numerator): | Net income (loss) (numerator): | ||||||||||||||||||||||||||||||||||||||
| Net income | Net income | $ | (19) | $ | 4,257 | $ | 5,335 | $ | 15,034 | ||||||||||||||||||||||||||||||
| Shares (denominator): | Shares (denominator): | ||||||||||||||||||||||||||||||||||||||
| Weighted average number of common shares outstanding used in basic computation | Weighted average number of common shares outstanding used in basic computation | 20,301 | 20,208 | 20,257 | 20,165 | ||||||||||||||||||||||||||||||||||
| Common shares issuable upon vesting of restricted stock | Common shares issuable upon vesting of restricted stock | — | 111 | 72 | 190 | ||||||||||||||||||||||||||||||||||
| Common shares issuable upon conversion of preferred shares | Common shares issuable upon conversion of preferred shares | — | 10 | 10 | 10 | ||||||||||||||||||||||||||||||||||
| Shares used in diluted computation | Shares used in diluted computation | 20,301 | 20,329 | 20,339 | 20,365 | ||||||||||||||||||||||||||||||||||
| Net income (loss) per common share: | Net income (loss) per common share: | ||||||||||||||||||||||||||||||||||||||
| Basic | Basic | $ | (0.00) | $ | 0.21 | $ | 0.26 | $ | 0.75 | ||||||||||||||||||||||||||||||
| Diluted | Diluted | $ | (0.00) | $ | 0.21 | $ | 0.26 | $ | 0.74 | ||||||||||||||||||||||||||||||
In July 2022, the Company’s 2022 Employee Equity Compensation Restricted Stock Plan (“2022 Employee Plan”) became effective upon the approval of the plan by the Company’s shareholders. The 2022 Employee Plan authorizes 1,000,000 shares of the Company's common stock available for issuance. The value of the restricted stock is determined based on the market value of the stock at the issuance date. The restriction period or forfeiture period is determined by the Company’s Compensation Committee and is to be no less than 1 year and no more than ten years, unless otherwise specified by the Compensation Committee. No shares had been issued under the 2022 Employee Plan as of December 31, 2022.
In June 2017, the Company was served with a lawsuit by a veterinary clinic, styled Animal Medical Center of Orland Park, Inc. v. PetMed Express, Inc., d/b/a 1-800-PetMeds,
On August 25, 2017 and September 7, 2017, shareholders filed putative securities class action lawsuits in the United States District Court for the Southern District of Florida, which were subsequently consolidated, against PetMed Express, Inc. (the “Company”) and the Company’s principal executive officers, one of whom is also a director. Relying exclusively on a false and defamatory, anonymous “report” posted on August 23, 2017 on the Aurelius Value website the plaintiffs alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Company has always denied and continues to deny the plaintiffs’ unfounded accusations. The plaintiffs investigated their claims, and on or about January 19, 2018, the plaintiffs voluntarily dismissed the consolidated lawsuit without prejudice.
The Company has settled complaints that had been filed with various states’ regulatorypharmacy boards in the past. There can be no assurances made that other states will not attempt to take similar actions against the Company in the future. The Company initiates litigationalso intends to protectvigorously defend its trade or service marks. There can be no assurance that the Company will be successful in protecting its trade or service marks.
Legal costs related to the above matters are expensed as incurred.
Shareholders
’ Equity:Additional | |||||||||||||||||||||||||
Paid-In | Retained | Common Stock | Additional Paid-In Capital | Retained Earnings | |||||||||||||||||||||
Capital | Earnings | ||||||||||||||||||||||||
Beginning balance at March 31, 2017: | $ | 6,806 | $ | 86,530 | |||||||||||||||||||||
| Beginning balance at March 31, 2022: | Beginning balance at March 31, 2022: | $ | 21 | $ | 11,660 | $ | 130,496 | ||||||||||||||||||
Share based compensation | 1,858 | - | Share based compensation | — | 1,536 | — | |||||||||||||||||||
Dividends declared | - | (12,343 | ) | Dividends declared | — | — | (6,297) | ||||||||||||||||||
Net income | - | 27,100 | Net income | — | — | 2,775 | |||||||||||||||||||
Ending balance at December 31, 2017: | $ | 8,664 | $ | 101,287 | |||||||||||||||||||||
| Ending balance at June 30, 2022 | Ending balance at June 30, 2022 | $ | 21 | $ | 13,196 | $ | 126,974 | ||||||||||||||||||
| Shares Issued | Shares Issued | — | — | — | |||||||||||||||||||||
| Share based compensation | Share based compensation | — | 1,681 | — | |||||||||||||||||||||
| Dividends declared | Dividends declared | — | — | (6,307) | |||||||||||||||||||||
| Net income | Net income | — | — | 2,579 | |||||||||||||||||||||
| Ending balance at September 30, 2022 | Ending balance at September 30, 2022 | $ | 21 | $ | 14,877 | $ | 123,246 | ||||||||||||||||||
| Share based compensation | Share based compensation | — | 1,770 | — | |||||||||||||||||||||
| Dividends declared | Dividends declared | — | — | $ | (6,319) | ||||||||||||||||||||
| Net income (loss) | Net income (loss) | — | — | (19) | |||||||||||||||||||||
| Ending balance at December 31, 2022: | Ending balance at December 31, 2022: | $ | 21 | $ | 16,647 | $ | 116,908 | ||||||||||||||||||
No
| Common Stock | Additional Paid-In Capital | Retained Earnings | |||||||||||||||
| Beginning balance at March 31, 2021: | $ | 20 | $ | 7,111 | $ | 134,141 | |||||||||||
| Share based compensation | — | 718 | — | ||||||||||||||
| Dividends declared | — | — | (6,080) | ||||||||||||||
| Net income | — | — | 4,428 | ||||||||||||||
| Ending balance at June 30, 2021 | $ | 20 | $ | 7,829 | $ | 132,489 | |||||||||||
| Shares Issued | 1 | — | — | ||||||||||||||
| Share based compensation | — | 882 | — | ||||||||||||||
| Dividends declared | — | — | (6,092) | ||||||||||||||
| Net income | — | — | 6,349 | ||||||||||||||
| Ending balance at September 30, 2021 | $ | 21 | $ | 8,711 | $ | 132,746 | |||||||||||
| Share based compensation | — | $ | 1,440 | — | |||||||||||||
| Dividends declared | — | — | (6,282) | ||||||||||||||
| Net income | — | — | 4,257 | ||||||||||||||
| Ending balance at December 31, 2021: | $ | 21 | $ | 10,151 | $ | 130,721 | |||||||||||
Note 8:Subsequent Events
On or about January 19, 2018, the plaintiffs voluntarily dismissed the consolidated putative securities class action lawsuit, filed in August and September 2017, without prejudice.
On January 22, 2018 our Board of Directors declared an increased quarterly dividend of $0.25 per share. The Board established a February 5, 2018 record date and a February 16, 2018 payment date. Based on the outstanding share balance as of January 30, 2018 the Company estimates the dividend payable to be approximately $5.2 million.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Executive Summary
PetMed Express was incorporated in the state of Florida in January 1996. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “PETS.” The Company began selling pet medications and other pet health products in September 1996. In March 2010, the Company started offering for sale additional pet supplies on its website, and these items are drop shipped to customers by third party vendors. Presently, the Company’s product line includes approximately 3,000 of the most popular pet medications, health products, and supplies for dogs and cats.
The Company markets its products through national advertising campaigns which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.1800petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 84% of all sales were generated via the Internet for the quarter ended December 31, 2017, compared to 83% for the quarter ended December 31, 2016. The Company’s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $86 and $81 per order for the quarters ended December 31, 2017 and 2016, respectively, and for the nine months ended December 31, 2017 and 2016, the average purchase was approximately $86 and $82 per order, respectively.
Critical Accounting Policies
Our discussion and analysis of our financial condition and the results of our operations are based upon our Condensed Consolidated Financial Statements and the data used to prepare them. The Company’s Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. On an ongoing basis we re-evaluate our judgments and estimates including those related to product returns, bad debts, inventories, and income taxes. We base our estimates and judgments on our historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies.
Revenue recognition
The Company generates revenue by selling pet medications and pet supplies primarily to retail consumers. The Company’s policy is to recognize revenue from product sales upon shipment, when the rights of ownership and risk of loss have passed to the customer. Outbound shipping and handling fees are included in sales and are billed upon shipment. Shipping expenses are included in cost of sales. The majority of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales.
The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card charge-backs or insufficient funds checks. The Company determines its estimates of the uncollectibility of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful accounts was approximately $26,000 at December 31, 2017 compared to $27,000 at March 31, 2017.
Valuation of inventory
Inventories consist of prescription and non-prescription pet medications and pet supplies that are available for sale and are priced at the lower of cost or market value using a weighted average cost method. The Company writes down its inventory for estimated obsolescence. The inventory reserve was approximately $55,000 at December 31, 2017 compared to $51,000 at March 31, 2017.
Advertising
The Company's advertising expense consists primarily of Internet marketing and direct mail/print advertising. Internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed when the related catalogs, brochures, and postcards are produced, distributed, or superseded.
Accounting for income taxes
The Company accounts for income taxes under the provisions of ASC Topic 740 (“Accounting for Income Taxes”), which generally requires recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the Consolidated Financial Statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting carrying values and the tax bases of assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse.
Results of Operations
The following should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain operating data appearing in the Company’s Condensed Consolidated Statements of Comprehensive Income:
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales | 63.5 | 68.5 | 64.7 | 69.3 | ||||||||||||
Gross profit | 36.5 | 31.5 | 35.3 | 30.7 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 9.7 | 10.1 | 8.8 | 9.2 | ||||||||||||
Advertising | 6.8 | 6.0 | 7.2 | 7.2 | ||||||||||||
Depreciation | 0.9 | 0.9 | 0.8 | 0.5 | ||||||||||||
Total operating expenses | 17.4 | 17.0 | 16.8 | 16.9 | ||||||||||||
Income from operations | 19.1 | 14.5 | 18.5 | 13.8 | ||||||||||||
Total other income | 0.8 | 0.3 | 0.5 | 0.2 | ||||||||||||
Income before provision for income taxes | 19.9 | 14.8 | 19.0 | 14.0 | ||||||||||||
Provision for income taxes | 4.8 | 5.7 | 5.9 | 5.2 | ||||||||||||
Net income | 15.1 | % | 9.1 | % | 13.1 | % | 8.8 | % | ||||||||
Three Months Ended December 31, 2017 Compared With Three Months Ended December 31, 2016, and Nine Months Ended December 31, 2017 Compared With Nine Months Ended December 31, 2016
Sales
Sales increased by approximately $7.2 million, or 13.7%, to approximately $60.1 million for the quarter ended December 31, 2017, from approximately $52.9 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017, sales increased by approximately $20.3 million, or 10.9%, to approximately $206.5 million compared to $186.1 million for the nine months ended December 31, 2016. The increases in sales for the three and nine months ended December 31, 2017 were primarily due to increased new order and reorder sales. The Company acquired approximately 106,000 new customers for the quarter ended December 31, 2017, compared to approximately 99,000 new customers for the same period the prior year. For the nine months ended December 31, 2017 the Company acquired approximately 408,000 new customers, compared to 388,000 new customers for the nine months ended December 31, 2016. The following chart illustrates sales by various sales classifications:
Three Months Ended December 31, | ||||||||||||||||||||||||
Sales (In thousands) | 2017 | % | 2016 | % | $ Variance | % Variance | ||||||||||||||||||
Reorder Sales | $ | 50,949 | 84.8 | % | $ | 44,937 | 85.0 | % | $ | 6,012 | 13.4 | % | ||||||||||||
New Order Sales | $ | 9,161 | 15.2 | % | $ | 7,929 | 15.0 | % | $ | 1,232 | 15.5 | % | ||||||||||||
Total Net Sales | $ | 60,110 | 100.0 | % | $ | 52,866 | 100.0 | % | $ | 7,244 | 13.7 | % | ||||||||||||
Internet Sales | $ | 50,358 | 83.8 | % | $ | 43,772 | 82.8 | % | $ | 6,586 | 15.0 | % | ||||||||||||
Contact Center Sales | $ | 9,752 | 16.2 | % | $ | 9,094 | 17.2 | % | $ | 658 | 7.2 | % | ||||||||||||
Total Net Sales | $ | 60,110 | 100.0 | % | $ | 52,866 | 100.0 | % | $ | 7,244 | 13.7 | % | ||||||||||||
Nine Months Ended December 31, | ||||||||||||||||||||||||
Sales (In thousands) | 2017 | % | 2016 | % | $ Variance | % Variance | ||||||||||||||||||
Reorder Sales | $ | 170,487 | 82.6 | % | $ | 154,202 | 82.8 | % | $ | 16,285 | 10.6 | % | ||||||||||||
New Order Sales | $ | 35,991 | 17.4 | % | $ | 31,942 | 17.2 | % | $ | 4,049 | 12.7 | % | ||||||||||||
Total Net Sales | $ | 206,478 | 100.0 | % | $ | 186,144 | 100.0 | % | $ | 20,334 | 10.9 | % | ||||||||||||
Internet Sales | $ | 173,175 | 83.9 | % | $ | 153,161 | 82.3 | % | $ | 20,014 | 13.1 | % | ||||||||||||
Contact Center Sales | $ | 33,303 | 16.1 | % | $ | 32,983 | 17.7 | % | $ | 320 | 1.0 | % | ||||||||||||
Total Net Sales | $ | 206,478 | 100.0 | % | $ | 186,144 | 100.0 | % | $ | 20,334 | 10.9 | % | ||||||||||||
Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. No guarantees can be made that sales will continue to grow in the future. The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For the quarters ended June 30, September 30, December 31, and March 31 of Fiscal 2017, the Company’s sales were approximately 29%, 25%, 21%, and 25%, respectively.
Cost of sales
Cost of sales increased by approximately $1.9 million, or 5.4%, to approximately $38.2 million for the quarter ended December 31, 2017, from approximately $36.2 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017, cost of sales increased by approximately $4.6 million, or 3.6%, to approximately $133.6 million compared to $129.0 million for the same period in the prior year. The increase in cost of sales is directly related to the increases in sales during the quarter and nine months ended December 31, 2017. Cost of sales as a percent of sales was 63.5% and 68.5% for the quarters ended December 31, 2017 and 2016, respectively, and for the nine months ended December 31, 2017 and 2016 the cost of sales was 64.7% and 69.3%, respectively. The cost of sales percentage decreases are mainly attributed to a product mix shift to higher margin items, offset by additional discounts given to customers to increase sales during the quarter and nine months ended December 31, 2017.
Gross profit
Gross profit increased by approximately $5.3 million, or 31.9%, to approximately $21.9 million for the quarter ended December 31, 2017, from approximately $16.6 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 gross profit increased by approximately $15.7 million, or 27.5%, to approximately $72.9 million, compared to $57.2 million for the same period in the prior year. The increases in gross profit are directly related to increases in sales during the quarter and nine months ended December 31, 2017. Gross profit as a percentage of sales was 36.5% and 31.5% for the three months ended December 31, 2017 and 2016, respectively, and for the nine months ended December 31, 2017 and 2016, gross profit was 35.3% and 30.7%, respectively. The gross profit percentage increases for the quarter and nine months ended December 31, 2017 are mainly attributed to a product mix shift to higher margin items, offset by additional discounts given to customers to increase sales during the quarter and nine months.
General and administrative expenses
General and administrative expenses increased by approximately $457,000, or 8.5%, to approximately $5.8 million for the quarter ended December 31, 2017, from approximately $5.4 million for the quarter ended December 31, 2016. The increase in general and administrative expenses for the quarter ended December 31, 2017 was primarily due to the following: a $496,000 increase in payroll expenses related to increased stock compensation expense; a $164,000 increase in bank service fees; and an $18,000 increase in professional fees. Offsetting the increase was a $198,000 decrease to property expenses; a $20,000 decrease to telephone expenses; and a $3,000 net decrease in other expenses which included licenses, insurance expenses, and bad debt expenses.
For the nine months ended December 31, 2017, general and administrative expenses increased by approximately $1.0 million, or 5.9%, to approximately $18.2 million from approximately $17.2 million for the nine months ended December 31, 2016. The increase in general and administrative expenses for the nine months ended December 31, 2017 was primarily due to the following: a $1.3 million increase in payroll expenses related to increased stock compensation expense; a $453,000 increase in bank service fees; and a $192,000 increase in professional fees. Offsetting the increase was a $582,000 decrease to property expenses; a $296,000 decrease to bad debt expense relating to decreased credit card chargebacks for the period; a $40,000 decrease in licenses and fees; and a $25,000 net decrease in other expenses which included insurance expenses, telephone, and travel expenses.
Advertising expenses
Advertising expenses increased by approximately $956,000, or 30.2%, to approximately $4.1 million for the quarter ended December 31, 2017, from approximately $3.2 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017, advertising expenses increased by approximately $1.6 million, or 12.3%, to approximately $14.9 million compared to advertising expenses of approximately $13.3 million for the nine months ended December 31, 2016. The increases in advertising expenses for the three and nine months ended December 31, 2017 was intended to stimulate sales and acquire new customers. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, increased to $39 for the quarter ended December 31, 2017, compared to $32 for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 and 2016 the advertising costs of acquiring a new customer were $37 and $34, respectively. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future new order sales, whereas a less favorable advertising environment may negatively impact future new order sales.
As a percentage of sales, advertising expense was 6.8% and 6.0% for the quarters ended December 31, 2017 and 2016, respectively, and for both of the nine months ended December 31, 2017 and 2016 advertising expense was 7.2%. The increase in advertising expense as a percentage of total sales for the quarter ended December 31, 2017 can be attributed to increased advertising spending to stimulate sales and acquire new customers. The Company currently anticipates advertising as a percentage of sales to be between approximately 7.0% and 8.0% for fiscal 2018. However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.
Depreciation
Depreciation expense increased by approximately $75,000 to approximately $532,000 for the quarter ended December 31, 2017, from approximately $457,000 for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 depreciation expense increased by approximately $735,000 to $1.6 million compared to $855,000 for the same period in the prior year. The increases to depreciation expense for the quarter and nine months ended December 31, 2017 can be attributed to an increase in new property and equipment additions related to the Company’s new corporate headquarters and distribution facility which were placed into service in fiscal 2017.
Other income
Other income increased by approximately $290,000 to approximately $456,000 for the quarter ended December 31, 2017 from approximately $166,000 for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 other income increased by approximately $870,000 to approximately $1.2 million compared to approximately $302,000 for the same period in the prior year. The increases to other income for the quarter and nine months ended December 31, 2017 are related to increased rental and advertising revenue, and increased interest income. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately $10.2 million remaining as of December 31, 2017, on any quarterly dividend payment, or on its operating activities.
Provision for income taxes
2022. There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that FACTORS. DISCLOSURES. D.C. 20549 2022 Exhibit Number Description Number of Pages in Original Document Incorporated By Reference 31.1 1 ** 31.2 1 ** 32.1 1 **For the quarters ended December 31, 2017 and 2016, the Company recorded an income tax provision of approximately $2.9 million and $3.0 million, respectively, and for the nine months ended December 31, 20172022 and 2016,2021 the Company recorded an income tax provision of approximately $12.2$2.3 million and $9.8$4.6 million, respectively. The decrease toin the income tax provision for the three months ended December 31, 2017, is related to an income tax rate reduction pursuant to the Tax Cuts and Jobs Act of 2017 (“2017 Act”), offset by an increase in operating income. The increase to the income tax provision for the nine months ended December 31, 2017,2022 is related to an increasea decrease in operating income offset byduring the income tax rate reduction due to the 2017 Act.periods. The effective tax rate for the quarter ended December 31, 20172022 was approximately 24.0%109.6%, compared to 38.3%approximately 22.9% for the quarter ended December 31, 2016,2021, and the effective tax rate for the nine months ended December 31, 20172022 was approximately 31.1%,29.9% compared to 37.5%approximately 23.4% for the nine months ended December 31, 2017.2021. The decreaseincrease to the effective tax rate for the three and nine months ended December 31, 2017 is due2022 can be attributed to a reductionmore non-deductible expenses and an increase in the Company’s corporatestate tax rate pursuant to the 2017 Act. In accordance with SEC Staff Bulletin No. 118, fiscal year end companies were required to determine the appropriate blended rate to apply based on their respective fiscal year end dates. Therefore, instead of applying a 35.0% federal tax rate for the quarter and nine months ended December 31, 2017, the Company applied a blended federal rate of 31.5%. This blended rate was applied to the nine months ended December 31, 2017, resulting in a tax benefit of approximately $1.7 million, which also included a one-time $384,000 reduction to our deferred tax liabilities due to the federal tax rate reduction.extension of the Company's business operations.recognizedpurchased a one-time charge5% minority interest in Vetster in the amount of $175,000 related$5.0 million and received warrants for additional equity in Vetster, which are tied to a true upfuture performance milestones. Under the terms of the fiscal 2017 income tax provision, which was recognized inagreement, the quarter ended December 31, 2017. DueCompany became the exclusive e-commerce provider for Vetster, and Vetster became the exclusive provider of telehealth and telemedicine services to the passageCompany. The minority interest investment is being valued on the cost basis and the investment will be evaluated periodically for any impairment.2017 Act the company expects an effective tax rate of approximately 34.0% for the quarter ending March 31, 2018,transaction is subject to customary closing conditions and an effective tax rate of approximately 24.0% for fiscal 2019.Liquiditycertain state pharmacy license and Capital ResourcesThe Company’s working capital at December 31, 2017 and March 31, 2017 was $80.7 million and $63.4 million, respectively. The $17.3 million increase in working capital was primarily attributable to cash flow generated from operations, offset by dividends paid. Net cash provided by operating activities was $35.1 million and $31.6 million for the nine months ended December 31, 2017 and 2016, respectively. This change can be mainly attributed to an increase in the Company’s net income and income taxes payable offset by increases in the Company’s inventory balance, compared to the same period in the prior year. Net cash used in investing activities decreased to $564,000 for the nine months ended December 31, 2017, compared to net cash used in investing activities of $9.9 million for the nine months ended December 31, 2016. This change in investing activities is related to increased property and equipment additionspermit filings related to the Company’s new corporate headquarterschange of control of PetCareRx. The transaction has been approved by the Board of Directors of both the Company and distribution facility in Delray Beach, FloridaPetCareRx, and the stockholders of PetCareRx, and is expected to close in the previousfourth quarter of fiscal year. Net cash used in financing activities was $12.3 million foryear 2023. Upon completion of the nine months ended December 31, 2017, compared to $11.5 million foracquisition, PetCareRx will become a wholly-owned subsidiary of the same period inCompany. prior year, which represented an increase in dividends paid in the period ended December 31, 2017.At December 31, 2017, the Company had approximately $10.2 million remaining under the Company’s share repurchase plan. Subsequent to December 31, 2017, on January 22, 2018 our Board of Directors declared an increaseda quarterly dividend of $0.25$0.30 per share. The Board established a February 5, 201820, 2023 record date and a February 16, 201827, 2023 payment date. DependingBased on future market conditionsthe outstanding share balance as of February 7, 2023 the Company may utilize its cash and cash equivalents onestimates the remaining balance of its current share repurchase plan, on dividends, or on its operating activities.Atdividend payable to be approximately $6.3 million.2017,2022, the Company had no outstanding lease commitments. We are not currently bound by any long or short term agreementsBoard of Directors approved and issued 1,200 restricted shares to employees pursuant to the 2016 Employee Plan.purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any increase inquarterly period ended December 31, 2022 and our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Presently, we have approximately $300,000 forecasted for capital expendituresAnnual Report on Form 10-K for the remainder of fiscal 2018, which will be funded through cash from operations. The Company’s primary source of working capital is cash from operations. The Company presently has no need for alternative sources of working capital, and has no commitments or plans to obtain additional capital.Off-Balance Sheet ArrangementsThe Company had no off-balance sheet arrangements at Decemberyear ended March 31, 2017.Cautionary Statement Regarding Forward-Looking Information, and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2022 under the heading “Risk Factors.” A reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Quarterly Report on Form 10-Q. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.quarterly reportQuarterly Report on Form 10-Q, "PetMed Express," "1-800-PetMeds," "PetMeds," "PetMed," "PetMeds.com," “1800PetMeds.com,” "PetMed.com," "PetMed Express.com," "the Company," "we," "our," and "us" refers to PetMed Express, Inc. and our subsidiaries.Three Months Ended
December 31,Nine Months Ended
December 31,2022 2021 2022 2021 Sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 74.1 70.8 72.4 71.7 Gross profit 25.9 29.2 27.6 28.3 Operating expenses: General and administrative 17.8 12.4 15.8 10.9 Advertising 7.9 7.1 7.6 7.5 Depreciation 1.6 1.2 1.3 1.0 Total operating expenses 27.3 20.7 24.7 19.4 Income (loss) from operations (1.4) 8.5 2.9 8.9 Total other income 1.6 0.6 1.0 0.5 Income before provision for income taxes 0.2 9.1 3.9 9.4 Provision for income taxes 0.4 2.1 1.2 2.2 Net income (loss) (0.2) % 7.0 % 2.7 % 7.2 % Three Months Ended ($ in thousands, except percentages) December 31,
2022December 31,
2021Consolidated Reconciliation of GAAP Net Income to Adjusted EBITDA: Net income (loss) $ (19) $ 4,257 $ (4,276) (100) % Add (subtract): Share-based Compensation 1,770 1,440 330 23 % Income Taxes 217 1,261 (1,044) (83) % Depreciation 941 710 231 33 % Interest (Income)/Expense (708) (84) (624) 743 % Acquisition and Partnership Transactions 539 — 539 n/m Employee Severance — — — n/m State Sales Accrual — — — n/m Adjusted EBITDA $ 2,740 $ 7,584 $ (4,844) (64) % Nine Months Ended ($ in thousands, except percentages) December 31,
2022December 31,
2021$
Change%
ChangeConsolidated Reconciliation of GAAP Net Income to Adjusted EBITDA: Net income $ 5,335 $ 15,034 $ (9,699) (65) % Add (subtract): Share-based Compensation 4,987 3,040 1,947 64 % Income Taxes 2,278 4,603 (2,325) (51) % Depreciation 2,552 2,051 501 24 % Interest (Income)/Expense (1,213) (243) (970) 399 % Acquisition and Partnership Transactions 894 — 894 n/m Employee Severance 364 — 364 n/m State Sales Accrual 925 — 925 n/m Adjusted EBITDA $ 16,122 $ 24,485 $ (8,363) (34) % Three Months Ended December 31, Revenue (In thousands) 2022 % 2021 % $ Variance % Variance Reorder sales $ 53,316 90.6 % $ 55,259 91.0 % $ (1,943) (3.5) % New order sales 5,554 9.4 % 5,458 9.0 % 96 1.8 % Total net sales $ 58,870 100.0 % $ 60,717 100.0 % $ (1,847) (3.0) % Internet sales $ 51,109 86.8 % $ 51,305 84.5 % $ (196) (0.4) % Contact center sales 7,761 13.2 % 9,412 15.5 % (1,651) (17.5) % Total net sales $ 58,870 100.0 % $ 60,717 100.0 % $ (1,847) (3.0) % Nine Months Ended December 31, Revenue (In thousands) 2022 % 2021 % $ Variance % Variance Reorder sales $ 176,384 90.7 % $ 184,607 89.0 % $ (8,223) (4.5) % New order sales 18,067 9.3 % 22,808 11.0 % (4,741) (20.8) % Total net sales $ 194,451 100.0 % $ 207,415 100.0 % $ (12,964) (6.3) % Internet sales $ 167,952 86.4 % $ 173,713 83.8 % $ (5,761) (3.3) % Contact center sales 26,499 13.6 % 33,702 16.2 % (7,203) (21.4) % Total net sales $ 194,451 100.0 % $ 207,415 100.0 % $ (12,964) (6.3) % , and commodity prices. Our financial instruments include cash and cash equivalents, accounts receivable, and accounts payable. The book values of cash equivalents, accounts receivable, and accounts payable are considered to be representative of fair value because of the short maturity of these2017,2022, we had $81.0$102.4 million in cash and cash equivalents, aand the majority of our cash and cash equivalents generate interest income based on prevailing interest rates. A significant change in interest rates would impact the amount of interest income generated from our excess cash and cash equivalents. It would also impact the market value of our money market funds.cash and cash equivalents. Our investmentscash and cash equivalents are subject to market risk, primarily interest rate and credit risk. Our investmentscash and cash equivalents are managed by a limited number of outside professional managers within investment guidelines set by our Board of Directors. Such guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting our investmentscash and cash equivalents to high-quality debt instrumentscash and cash equivalents with both shortshort- and long termlong-term maturities. We do not hold any derivative financial instruments that could expose us to significant market risk. At December 31, 2017,2022, we had no debt obligations.The Company’s(asas defined in Rule 13a-15Rules 13a‑15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended)amended ("Exchange Act"), as of the quarter ended December 31, 2017,2022, the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded as of the Evaluation Date, that our disclosure controls and procedures are effective such that the information relating to our Company,us, including our consolidated subsidiaries, required to be disclosed by the Companyus in reports that it fileswe file or submitssubmit under the Exchange Act: (1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.part iiother informationOTHER INFORMATIONNone.FACTORS.commoncommon stock. Please refer to our Annual Report on Form 10-K for Fiscal Year 2017the fiscal year ended March 31, 2022 for additional information concerning these and other uncertainties that could negatively impact the Company.The Company did not make any sales of unregistered securities during the third quarter of Fiscal 2018.Issuer Purchases of Equity SecuritiesNone.None.DISCLOSURES.applicable.applicable.The following exhibits are filed as part of this report.31.131.1* 31.2* 31.2Certification of Principal Financial Officer Pursuantadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended.32.132.1** 101.INS* Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) signaturesRegistrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.(The “Registrant”)January 30, 2018By: /s/ Menderes Akdag Menderes Akdag Chief Executive Officer and President (principal executive officer)By: /s/ Bruce S. Rosenbloom Bruce S. Rosenbloom Chief Financial Officer (principal financial and accounting officer)By: /s/ Mathew N. Hulett Mathew N. Hulett Chief Executive Officer and President (Principal Executive Officer) By: /s/ Christine Chambers Christine Chambers Chief Financial Officer (Principal Financial and Accounting Officer) , D.C.20549______________________________________________DECEMBER2017______________________________________________EXHIBIT INDEX 101.INS*** XBRL Instance 101.SCH*** XBRL Taxonomy Extension Schema 101.CAL*** XBRL Taxonomy Extension Calculation 101.DEF*** XBRL Taxonomy Extension Definition 101.LAB*** XBRL Taxonomy Extension Labels 101.PRE*** XBRL Taxonomy Extension Presentation ** Filed herewith *** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.